Paula sells boomerangs. The price elasticity of demand for boomerangs is 0.54. If Paula wishes to increase her revenue, should she raise or lower the price of boomerangs? Explain your answer in a few sentences.

Respuesta :

To increase her Revenue when selling Boomerangs, Paula should decrease the price rather than increase it.

What is the price elasticity of demand?

This refers to how much the demand for a product (wish for the buyers to buy the product) changes when there is a price change.

What does a 0.54 in price elasticity of demand mean?

This ratio implies that if the price changes by 1% the demand changes by 0.54%. This means there is not a very big change in the demand or the product is not very elastic, and therefore if the increases the price the revenue will stay the same.

Based on this, to increase her Revenue Paula should decrease the price since this can catch the attention of new potential customers.

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